TaxTMI 
TaxTMI 
2019 (4) TMI 1168
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....the assessing authority. The assessing authority disallowed the expenditure incurred in the foreign currency as well as from total turnover ; disallowed compensation received on termination of export/service contract as it cannot be treated as business income, arising out of export activity and denied the claim of brought forward losses against income claimed as deduction under section 10A of the Act. 3. Aggrieved by the said order of assessment, the respondent-assessee filed appeals before the Commissioner of Income-tax (Appeals)-II, Bangalore. The appellate authority by its order dated February 28, 2014 allowed the appeals of the assessee in part. While allowing the appeals, the appellate authority held that the compensation received by the assessee on termination of export/service contract is capital in nature. Further the appellate authority held that if certain expenses are to be reduced from the total turnover, deduction is to be calculated under section 10A of the Act. The appellate authority also allowed set off of brought forward loss. 4. Aggrieved by the said order of the appellate authority, the Revenue filed an appeal before the Income-tax Appellate Tribunal, Bang....
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....le court in the case of CIT v. Yokogowa which has not reached finality ? 3. Whether on the facts and in the circumstances of the case, the Tribunal is right in setting aside the addition of Rs. 1.35 crores made by the assessing authority when the assessee itself had shown the amount under Schedule VIII, being other income, holding that the said income cannot be treated as business income arising out of export activity ? 4. Whether on the facts and in the circumstances of the case, the Tribunal is right in law wherein the Tribunal erred in directing the assessing authority to include the amount claimed by the assessee as part of 10A deduction in the export turnover which relates to the software supply to another STP unit, namely, M/s. Anlog Devises India Pvt. Ltd., by following the decision of this hon'ble court in the case of Tata Elxsi Ltd., in ITA No. 411 of 2008 dated October 20, 2014 if it is found that the sale is made to the said STP unit even when the ingredients of section 10A are not satisfied to include the said turn over as part of section 10A ?" 5. These appeals coming up for admission, having heard learned counsel for the parties and having per....
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.... A statute is the intention of the Legislature who enacts it after having regard to various facts and circumstances. It is a cardinal principle of law that the interpretation by the court shall be done in such a way that the intention of the Legislature shall prevail and no injustice occurred with the parties. The rule of harmonious construction is the thumb rule to interpretation of any statute. An interpretation which makes the enactment a consistent whole, should be the aim of the courts and a construction which avoids inconsistency or repugnancy between the various sections or parts of the statute should be adopted . . . The similar nature of controversy, akin to this case, arose before the Karnataka High Court in CIT v. Tata Elxsi Ltd. [2012] 204 Tax man 321 (Karn) ; [2012] 349 ITR 98 (Karn). The issue before the Karnataka High Court was whether the Tribunal was correct in holding that while computing relief under section 10A of the Income-tax Act, the amount of communication expenses should be excluded from the total turnover if the same are reduced from the export turnover ? While giving the answer to the issue, the High Court, inter alia, held that when a p....
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....a Ltd. (supra) and held in favour of the assessee. The hon'ble Supreme Court at paragraphs 13 to 16 has held as follows (page 288 of 391 ITR) : "The retention of section 10A in Chapter III of the Act after the amendment made by the Finance Act, 2000 would be merely suggestive and not determinative of what is provided by the section as amended, in contrast to what was provided by the unamended section. The true and correct purport and effect of the amended section will have to be construed from the language used and not merely from the fact that it has been retained in Chapter III. The introduction of the word 'deduction' in section 10A by the amendment, in the absence of any contrary material, and in view of the scope of the deductions contemplated by section 10A as already discussed, it has to be understood that the section embodies a clear enunciation of the legislative decision to alter its nature from one providing for exemption to one providing for deductions. The difference between the two expressions 'exemption' and 'deduction', though broadly may appear to be the same, i.e., immunity from taxation, the practical effect of it in ....
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....n is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. This is also more than clear from the contemporaneous Circular No. 794 dated August 9, 2000 which states in paragraph 15.6 that (see [2000] 245 ITR (St.) 21, 36) : 'The export turnover and the total turnover for the purposes of sections 10A and 10B shall be of the undertaking located in specified zones or 100 per cent. export oriented undertakings, as the case may be, and this shall not have any material relationship with the other business of the assessee outside these zones or units for the purposes of this provision'." In view of the above decision, the substantial question of law No. 2 would no more arise for consideration. 8. The third question of law urged by the Revenue is with regard to the compensation amount of Rs. 1.35 crores received by the assessee on account of termination of export/service contract and as to whether that income could be treated as business incom....
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....ved by the assessee, which income is to be treated as income derived from out of the export. Hence the compensation/ damages received by the assessee on account of termination of service/ export contract is to be treated as profits of business. 10. The learned counsel for the respondent-assessee relies upon a Full Bench decision of this court in CIT v. Hewlett Packard Global Soft Ltd. [2018] 403 ITR 453 (Karn), wherein this court held that incidental income of the export oriented unit, by way of interest on bank deposits or staff loans would be entitled to 100 per cent. exemption. This court at para 37 after considering the various decisions held as follows (page 472 of 403 ITR) : "On the above legal position discussed by us, we are of the opinion that the respondent-assessee was entitled to 100 per cent. exemption or deduction under section 10A of the Act in respect of the interest income earned by it on the deposits made by it with the banks in the ordinary course of its business and also interest earned by it from the staff loans and such interest income would not be taxable as 'Income from other sources' under section 56 of the Act. The incidental activity o....
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....r that 'export turnover' does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India. 15. Sub-section (2) of section 10A makes this provision applicable to undertakings which have begun or begin to manufacture or produce articles or things or computer software during the previous year relevant to the assessment year commencing on or after the 1st day of April, 1981, in any free trade zone ; or commencing on or after the 1st day of April, 1994, in any electronic hardware technology park, or, as the case may be, software technology parks ; commencing on or after the 1st day of April, 2001, in any special economic zone. 16. The 'software technology park' as well as 'free trade zone' are defined for the purpose of this section in Explanation 2 to sub-section (9) of section 10A. 17. The word 'export' has been defined under section 2(18) of the Customs Act, 1962. As per the said definition, 'export' with its grammatical variations....